How to mitigate the insurance premium increases
Bernard Dunn CA outlines the steps businesses can take to mitigate the insurance premium rise.
In February 2017, the Lord Chancellor announced a significant reduction to the Ogden Discount Rate of 2.5%, to the revised level of -0.75%, causing UK insurer shares’ to plummet and sparking reaction from the insurance industry.
How does the rate reduction affect my business?
Insurance policies that cover bodily injury – principally Motor and Employers’ Liability – will need to be re-priced to ensure that premiums generate adequate funds to meet liability claims costs.
Furthermore, some insurers may well choose not to underwrite these classes of business, leading to a reduction in market supply. The two-fold effect is that premiums will inevitably go up and insurers will become more selective on the risks they choose to insure, going forward.
CAs working in the general insurance sector will already be grappling with the reserving process, and reviewing their operating ratios and forecasts.
For those working in industry and the public sector, their businesses will need to demonstrate and evidence how well they manage risk and safety, to ensure they are at the ‘top of the underwriter’s pile’ come renewal time.
Companies with resilient and demonstrable health and safety procedures (which drive attitude, behaviours and culture) will be in a stronger position to lessen the knock-on effects, and combat the pressure from insurers to increase premium costs.
CAs in advisory roles (both professionals and non-execs) will also play their part in highlighting that prevention is better than picking up the pieces afterwards, including higher insurance costs.
How to mitigate the insurance premium rise
The first step to controlling risk in the workplace is hazard identification.
Second, it is down to control measures and the effective documentation of both. It is impossible to eliminate all risks and prevent every accident, but when an accident does occur it is vital a company has the resources available to minimise the effect; ensure that processes are robust and that documentation is clear and comprehensive to defend the claims, should they come in.
As part of the process of risk management, businesses should also consider risk transfer: working with their broker and risk advisers to explore whether their limits of cover and sums insured remain adequate, given the potential change in exposure as the revised rate takes effect.
Remember that organisations which closely manage risk and safety in the workplace with a favourable claims history will always be attractive to insurers as good business.